Archive for May, 2012

Published in The New York Times on Wednesday, May 9, 2012. Read the full article here. An excerpt is pasted below.

To be successful in business today, a company must do more than just sell a good product. According to a recent study (pdf), 80 percent of Americans are likely to switch brands, if comparable in price and quality, to one that supports a social cause.

In response, many businesses have changed their practices to be — or at least appear to be — more connected to social causes. Some companies give a percent of their profits to charity. Others host lavish philanthropic galas. More recently, some companies have begun adopting a charity model known as “buy one give one” (B1G1).

Toms is probably the largest and best known of the B1G1 companies. For every pair of shoes someone buys, a second pair is donated to a child in need. The eyewear company Warby Parker employs a similar model. Every time it sells a pair of glasses, it sends money for another pair to a social enterprise that then sells them in poor countries. Established brands like Ikea have tested the model, as have nonprofits like One Laptop Per Child and a growing number of start-up companies — including ones that sell vitamins, blankets and children’s clothing.

The B1G1 model holds a lot of intuitive appeal, which has likely contributed to its proliferation. It allows people who may otherwise be disconnected from problems in the developing world to effortlessly engage with them by, say, purchasing a stylish pair of sunglasses. It is also more tangible than most corporate philanthropy. “You actually feel that there’s someone out there who has a pair of shoes because of your transaction,” said Dean Karlan, a professor of economics at Yale University and a co-author of “More Than Good Intentions.”

B1G1 has the potential to raise funds perpetually, as it encourages philanthropy in everyday purchasing decisions. “To the extent [B1G1] unlocks money that would have otherwise not been available, that’s fantastic,” said Antony Bugg-Levine, chief executive of the Non-Profit Finance Fund. If the goods are directed to effective organizations, B1G1 companies could give many social causes a boost.

The model could also fail. Some companies may be interested in adopting B1G1 more to win customer loyalty than to support a social cause and may thus overstate the impact of their charitable activities. Some B1G1 companies may form a partnership with nongovernmental organizations with unreliable track records, impose ill-fitting donations on communities with no use for them or supplant local markets. “To the extent there are local shoemakers, they may not have much of a business if [a B1G1 company] comes and gives away shoes for free,” said Greg Dees, professor of social entrepreneurship at Duke University.

Dees and others also question whether B1G1 handouts can produce lasting change. “There is definitely a need for footwear in underserved markets,” said Valeria Budinich, vice president of Ashoka, a nonprofit that supports social entrepreneurs. “But those markets need new technology, production processes and distribution chains that [are specifically designed for] rural areas. Models like Toms have many great features but aren’t designed to come up with that level of transformation.”

In fact, most development experts refrain from painting B1G1 companies as social enterprises, as some outlets have, and instead consider them philanthropic ventures. “To me, it’s only a social enterprise if the social impact comes from core operations,” Dees said. “How you use the money afterward is your choice.”

No matter the obstacles, it should be recognized that the B1G1 model is attractive to consumers and consequently a potentially powerful method to bolster social change — and it’s worth examining whether it can be turned into a long-term solution for populations living without basics like shoes or prescription eyewear. How can products be distributed so they make a sustainable difference in the lives of those whom B1G1 companies are trying to help?